Trump jumps; airlines lose altitude; Real Mex prices, Consolidated hits the road

By Paul Deckelman and Paul A. Harris

New York, March 24 - Trump Hotels & Casino Resorts Inc. bonds and shares were higher Wednesday - including a more than 20% rise in the stock on heavy volume - apparently given a boost by a bullish article about the Atlantic City, N.J.-based gaming company that's made the rounds of investors this week. On the downside, however, airline issues trended lower, hit with the double-whammy of rising fuel prices and increased terrorism fears.

Primary activity remained muted, especially in the wake of the sobering news heard Tuesday that ITC^Deltacom Inc. had elected to postpone its two-part note offering. However, Real Mex Restaurants was heard to have brought its small offering of six-year notes to market successfully, and Consolidated Communications was heard getting ready to take its planned $240 million offering of ten-year notes on the road on the road starting Thursday.

In the secondary arena, a trader quoted the Trump Atlantic City Associates/Atlantic City Funding 11¼% first mortgage bonds due 2006 as having climbed to 84.5 bid, 85.5 offered, a gain of a point-and-a-half on the session, while the Trump Holdings & Fundings 11 5/8% notes due 2010 were a bit more restrained, up half a point at par bid, 100.75 offered.

Meantime, the company's shares were "up huge," the trader said, booming 56 cents (21.29%) to $3.19 on busy New York Stock Exchange dealings of 2.6 million shares, over 20 times the normal volume.

Internet bulletin boards buzzed all day with speculation about the move, with Trump partisans crowing that the undervalued issue was finally taking off, given wings by the recent debt restructuring deal with Credit Suisse First Boston, the positive buzz from company chairman Donald J. Trump's new hit NBC TV show "The Apprentice" (the next three episodes of which will take place at Trump Hotels' flagship Taj Mahal property in Atlantic City), and a bullish story which ran on CBS MarketWatch, quoting several analysts as believing the shares - which had long languished in the $2.50 range - could be worth as much as $10, once the company reaches agreement with the bondholders on restructuring and the CSFB investment kicks in.

Trump detractors meantime pointed out that before any of those good things were to happen, the company must come to a restructuring accord with the holders of its $1.8 billion of outstanding bond debt, including about $1.5 billion of the AC bonds - no easy task, especially given The Donald's history of trying to play hardball with his bondholders.

They also sneered that the MarketWatch story was just a puff piece and that the main analyst quoted - Jim Gentrup of Provident Equity Research in Gilbert, Ariz., who predicted the potential $10 value of the shares - is hardly any kind of well-known name from a major investment house. They further warned that the gain in the stock over the past two days, particularly Wednesday's rocket-like rise, might be a nothing more than a classic case of what they termed "pump and dump" action by institutional holders.

Ameristar up on guidance

Also in the gaming area, Ameristar Casinos Inc.'s 10¾% notes were heard up half a point, at 115.75 bid, after the Las Vegas-based casino operator announced sharply updated first-quarter earnings guidance.

Ameristar raised its estimate of consolidated operating income to $41 to $42 million versus prior guidance of $33 to $35 million; it predicted EBITDA of about $58 million, up from the previous projection of $50 to $52 million; and it said that diluted earnings per share would total around 57 cents, increased from the prior guidance of a 40 to 44 cents.

Airlines plunge

Elsewhere, a trader declared that the airlines "were bad, between [the threat of] bombs, oil prices, and the nasty article that came out on Bloomberg."

It was, he said, "like free fall for a while today."

That Bloomberg analysis "suggested that these guys are never going to make money again."

The main thrust of the piece, he said was that "the big guys can't compete" with the lower-cost carriers like JetBlue, ATA, and AirTran, most of them relatively new startups (except for longtime low-cost leader Southwest Airlines).

The upstarts have been badly carving into the market share of the old-line network carriers such as American Airlines, the bankrupt United Airlines, Delta Airlines, Northwest Airlines and Continental Airlines.

"What they're doing is just adding routes and cutting fares, and that's just not going do it and let them compete," since the major carriers are saddled with higher labor costs than their rivals and cutting fares to hold or gain market share just cannibalizes their revenue base.

On top of that, he added, "there's terrorism. Let's face it, if you have one more [9/11-like] event in the U.S., anywhere, and the whole sector is going to crap out again" just like it did following the Sept. 11 attacks. "That's what it feels like anyway."

He saw Delta Airlines 8.30% notes due 2029, which had been quoted in the lower 60s just "a couple of weeks ago," falling to 49.5 bid. 53.5 offered from Tuesday's close at 52.5 bid, 55.5 offered. "So those were getting kicked around."

At another desk, the Atlanta-based air carrier's 7.9% notes due 2009 were quoted at around 61 bid," with an observer noting that the bonds have "become cheaper over the last few sessions" - probably really since the horrific March 11 terrorist attack in Spain, which reignited previously quiet investor worries about renewed worldwide terrorist activity.

The trader saw Northwest's 7 5/8% notes due 2006 as having dipped as low as 95 bid, 96 offered, from Tuesday levels at 97 bid, 98 offered, before improving slightly from their lows to close at 95.5 bid, 96.5 offered. Northwest's 9 7/8% notes due 2007 were heard trading at 82 bid, "down a couple from recent levels," a source said.

All told, the trader declared, the sector was "kind of ugly."

Service, Toys steady, Greyhound down

Service Corp. International's 6% notes due 2005 were little changed around 103 bid, even after the Houston-based deathcare giant's announcement that it will tender for $150 million of the outstanding notes (see Tenders and Redemptions elsewhere in this issue for further details).

Toys 'R' Us' 6 7/8% notes due 2006 were seen little changed to off slightly, at 106 bid, 107 offered, after Moody's Investors Service cut the company's debt ratings to junk levels, citing increased lower-priced competition the Wayne, N.J.-based toy and children's products retailer faces from the likes of discount retailing giants Wal-Mart and Target.

Moody's lowered the company's senior unsecured rating two notches to Ba2 from Baa3 previously, completing the fall from investment-grade grace that began in January when Standard & Poor's clipped the company's angel-wings.

A trader saw Greyhound Lines' Inc.'s 11½% notes due 2007 as having weakened to 91.75 bid, 92.75 offered, down a point-and-a half despite a lack of fresh news on the Dallas-based inter-city bus operator.

"But you know that some of the bonds that have recently rallied - the CCCs and the other credits that have moved up so much - even in a market that's treading water overall, some of that stuff is going to fall back a bit, so I'm not surprised, " he concluded.

Primary market facing new reality

A light news day in the high-yield primary market on Wednesday produced terms on one new junk issue, while news of one new roadshow start was heard.

Meanwhile a senior sell-side official told Prospect News on Wednesday that the primary market seems to be facing a new set a pricing circumstances as it prepares for a significant build-up in the spring 2004 pipeline.

"It was choppy today," the official recounted shortly after the session ended.

"We're seeing things like Nextel run up, whereas other guys in the sector are trading down. So the trends are not necessarily sector-specific but they have become somewhat credit-specific."

One source of uneasiness in the investment banks, the official continued, was the news late Tuesday that ITC^DeltaCom withdrew its offering of $300 million of second priority senior secured notes (Caa2/CCC+), stating that "generally weaker market conditions and a stronger preference among investors for fixed-rate notes made the refinancing unattractive at this time."

"Certainly people are concerned about deals getting postponed," the senior sell-sider said. "The market anticipates a great amount of supply coming right after the holiday. People are throwing around numbers of anywhere from $4-8 billion of new paper to come in the month of April alone.

"So people are trying to force the market back a little bit, just to prep it, so that when the new issues come they're not coming at levels that ultimately trade off as supply continues to come.

"So they will try to back up the market a little bit for pricings and then let it rebound a little bit and hopefully make some money."

Offers in secondary pressure new paper

The official went on to say that one change that seems to have taken hold in high yield is that there are bonds for sale in the aftermarket.

"Secondary levels have not yet caught up to the resistance that the primary market is giving us," the source said. "The market is just quieter, frankly; it's softer but the volumes are down significantly from January, and even from February at this point.

"That's why we haven't seen a huge impact in secondary trading levels yet - just because there has not been a lot of it. Before we had bids without offers. Now we have bids and offers. But all the guys who are owning aren't ready to reconcile themselves to lower prices, thinking there could be a rebound.

"But there is enough out there now in the secondary market that people don't feel that they need to be pressured into new issuance."

Real Mex dishes out $105 million

The sole deal to price in the mid-week primary market session came from Southern California's Real Mex Restaurants, Inc., which sold $105 million of six-year senior secured notes (B2/B-) at par to yield 10%.

That was wide of the 9 5/8% price talk.

Jefferies & Co. ran the books on the debt refinancing deal.

Consolidated Communications plans deal

One roadshow start was heard during Wednesday's session.

Consolidated Communications, a rural local exchange carrier headquartered in Mattoon, Ill., will hit the road Thursday with an offering of $240 million of 10-year senior notes (B3/B-).

The Credit Suisse First Boston and Citigroup-led acquisition financing deal figures to stay on the road through the March 29 week.

Talk on Hercules, KCS Energy, U.S. Concrete

Also during Wednesday's session price talk was heard on three offerings, all of which are expected to price by the end of the week.

The price talk is 6½% area on Hercules Inc.'s offering of $250 million of 25-year notes (Ba3/B+), which are expected to price on Thursday afternoon via Credit Suisse First Boston.

The structure of the 25-year notes will mean they resemble a 10-year non-call-five note, according to an informed source.

Meanwhile price talk is 7¼%-7½% on KCS Energy Inc.'s offering of $150 million eight-year senior notes (B3/B-), expected to price mid-day on Friday, also via Credit Suisse First Boston.

And price talk of 8½% area emerged on U.S. Concrete, Inc.'s $150 million of 10-year senior subordinated notes (B3/B-), expected to price on Friday, with Citigroup and Banc of America Securities running the books.

Looking further ahead, Prospect News learned that UGS PLM Solutions is expected to bring $1 billion of debt financing during May to support the previously announced acquisition of UGS PLM by Bain Capital, Silver Lake Partners and Warburg Pincus from Electronic Data Systems Corp. (EDS) for $2.05 billion in cash.

The financing will be split between high yield and bank transactions, which Citigroup, JP Morgan and Morgan Stanley running the books on the bond deal.

And more details emerged on Adelphia Communications Corp.'s planned exit financing.

The huge debt offering will include $3.3 billion of 10-year senior unsecured notes non-callable for five years.

The Greenwood Village, Colo. cable television company is also intending to obtain $5.5 billion of new bank debt.

Proceeds will be used to finance the cash payments to be made under its proposed Chapter 11 plan of reorganization.

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